AT&T and Mexican Affiliate Seek Stake in Italian Company

By ERIC SYLVERS

Published: April 3, 2007

AT&T and its Mexican affiliate, Am?ca M?, have bid more than $6 billion for control of Italy's largest cellphone company, Telecom Italia.

But the offer comes as Italian politicians have been wrapping themselves in the flag in an effort to keep the largest Italian companies from falling into foreign hands, and this takeover effort appears headed for the same response.

Several Italian ministers and government leaders made clear on Monday that they would seek to block the deal, proposed late Sunday, to buy a two-thirds share in a holding company that controls Telecom Italia; that stake is held by the Pirelli Group.

Pirelli is the main shareholder of Olimpia, which holds the largest stake in Telecom Italia, which is also Italy's dominant fixed-line phone business.

''It will be up to our system to find the resources to react and, I hope, to keep Telecom Italia from falling out of our system,'' Paolo Gentiloni, the communications minister, said. ''It's not a question of the government interfering in market mechanisms. The government has indicated an objective of general interest and that is that the industrial and financial system of Italy is able to react to this challenge.''

Last year, the Italian government succeeded in blocking an effort by Abertis, a Spanish company, to buy Autostrade, the largest Italian toll road operator.

Three other Italian mobile phone operators are already owned by foreign companies, and FastWeb, the second-biggest fixed-line company in Italy, is being acquired by Swisscom.

The deal had hardly been announced when Mr. Gentiloni said that he was ''very worried'' by it. He said he was speaking also for the prime minister, Romano Prodi. Mr. Prodi did not comment publicly Monday on the bid, but he said recently that he was not against foreign companies buying Italian companies.

Mr. Prodi's patchwork government -- which includes two Communist parties, centrist Catholics and free-market liberals -- has been torn internally since its inception last year. But the prevailing sentiment Monday appeared to oppose the deal.

''We should be worried about this,'' said Nicola Latorre, a senator in the largest party in the center-left coalition.

There was no consensus among independent observers about whether the Italian government would succeed in its endeavor to block the deal. Carola Bardelli, an analyst with Deutsche Bank, wrote in a note to clients that she saw ''little possibilities'' for the government to block the deal.

But the investment bank Mediobanca and Assicurazioni Generali, the largest Italian insurer, have a right to match the offer for the stake that Pirelli is selling in Olimpia. Persuading Mediobanca and Generali to buy that stake is probably the government's best chance to scuttle the deal, according to analysts.

AT&T and Am?ca M?, a venture of the Mexican billionaire Carlos Slim Hel?ill each get about $21 million if Pirelli sells the stake to Mediobanca and Generali.